BRAZIL Law and Practice Contributed by: Mariana Cobra, Janaína Vargas, Mayara Zanini and Marcela Freire, Mattos Filho
on real estate transactions must be evaluated on a case-by-case basis, hold backs and escrow accounts as collateral for any tax liability are the
WHT must be withheld and collected on the date of the taxable event by the foreign investor’s attorney-in-fact in Brazil. On the other hand, capital gains realised by foreign investors from the sale of real property located in Brazil are subject to progressive rates ranging from 15% to 22.5%. Capital gain is the positive difference between (i) the price received from the disposal of the asset and (ii) the corre - sponding acquisition cost for the seller. If the country of residence of the foreign inves - tor has entered into a treaty to avoid double taxation with Brazil, the WHT levied on rental income and/or capital gain from the disposal of real estate may be subject to different tax rates than the ones mentioned above. 8.5 Tax Benefits Brazilian companies subject to corporate income taxes under the taxable income method may deduct from the calculation basis the expenses of depreciation, maintenance, repair, conser - vation, taxes, fees, insurance, and any other expenses with real estate, provided that such real estate is intrinsically related to the produc - tion or sale of goods and services of the respec - tive companies. Conversely, Brazilian individuals, foreign inves - tors and Brazilian companies subject to corpo - rate income taxes under other methods (eg, esti - mated profit method) are not entitled to deduct the expenses of depreciation, repair and con - servation of the real estate from their corporate income tax calculation basis.
most usual methods. 8.3 Municipal Taxes
There is not a specific tax paid on the occupa - tion of business premises. However, there are municipal taxes relating to the property that are usually transferred to its user, such as Urban Property Tax (IPTU) and waste collection tax. The rate of IPTU may vary from one municipal - ity to another. In general, the assessment of IPTU is based on the value of the property’s built and land area enrolled with the municipality. Exemptions from the payment of IPTU may be granted due to (i) characteristics of the taxpayer (eg, retirees, pensioners); or (ii) characteristics of the property. 8.4 Income Tax Withholding for Foreign Investors Usually, foreign investors prefer to invest in real estate through Brazilian vehicles. Notwithstanding, as a rule, income and gains earned by foreign investors in relation to direct investments in real estate located in Brazil are subject to Withholding Income Tax (WHT) in Bra - zil. Rental income from real estate located in Brazil earned by foreign investors is subject to WHT at a 15% rate. The respective WHT levy on the net value of the rent, that is, after deducting the expenses related to taxes and fees levied on the relevant real estate, the expenses paid for collection or receipt of the rent, and common charges, among others.
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